Monday, November 19, 2012

Federal Appeals Court: Minnesota Homeowners' Quiet Title Action Claiming F'closing Banksters' Mortgage Assignments Either Were Unrecorded Or Executed By Those Lacking Legal Authority May Have Legs; Lower Court Dismissal Overruled

Law 360 reports:

  • The Eighth Circuit in a published opinion Thursday revived a quiet title action by foreclosed-upon homeowners who say assignments of the titles to their properties were faulty, distinguishing their claims from a discredited theory requiring a foreclosing party to hold an original promissory note [ie. "show-me-the note theory"].

    In its eight-page opinion, the three-judge panel said Minnesota borrowers had advanced a pair of arguments that might have legs.(1)
For more, see 8th Circ. Revives Foreclosure Suit Over Faulty Assignments.

For the ruling, see Murphy v. Aurora Loan Services LLC, No. 12-1398 (8th Cir. November 8, 2012).

See Homeowners Have Standing To Challenge Faulty Mortgage Assignments From One Bankster To Another, But Only Where Defects Render Conveyance Absolutely Void, Not Merely Voidable for another recent federal case where banksters again failed in a move to nullify a homeowner challenge to the validity of mortgage assignments by dismissively attempting to associate said challenge with the "show-me-the-note" theory.

(1) The appeals court addressed these two arguments in this excerpt:
  • However, because two of the quiet-title theories do not rely on the failure of the foreclosing party to produce the note, see Compl. ¶ 57(f), (g), we conclude that the district court erred in its wholesale dismissal of the quiet-title claim pursuant to Jackson.

    Under these two theories, assignments from MERS to Aurora of legal title to the mortgages either were unrecorded or executed by individuals lacking the legal authority to do so.

    The resulting defect in  the chain of title of the mortgages, according to Homeowners, deprives Aurora of the authority to foreclose on their properties. In contrast to the complaint in Butler, these theories do not rely on the discredited “show-me-the-note” theory.

    Neither party provided briefing specific to the two remaining quiet-title theories. For instance, it is not clear whether the Homeowners still have any interest in the properties. Minnesota’s foreclosure-by-advertisement statute explains that once a sale is recorded and the time period for redemption has passed, “all the right, title, and interest of the mortgagor in and to the premises” is conveyed to the purchaser. Minn. Stat. § 580.12 (2012); see also Herber v. Christopherson, 15 N.W. 676, 677 (Minn. 1883).

    Furthermore, no party has discussed whether the Homeowners’ interest is “adverse” to the interest held by MERS or Aurora for purposes of the quiet-title statute, as Aurora claims essentially a security interest in the properties and the Homeowners’ complaint concedes that valid security interests in the  properties were created and transferred out of the Homeowners’ bundle of property rights.

    Although we may affirm a dismissal on grounds not relied upon by the district court, where the parties did not adequately develop an issue, remanding to allow the district court to address the matter in the first instance is appropriate. See Reeder v. Kan. City Bd. of Police Com’rs, 733 F.2d 543, 548 (8th Cir. 1984). We leave these and any other issues surrounding the two remaining quiet-title theories for the district court to address.

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